Chinese ETFs and ADRs jumped in Friday trading.

Fangdd rose 18%; Daqo New rose 10%; YINN rose 4%; Alibaba rose 3%; Baidu rose 2%; JD.com, PDD rose 1%.

Rising expectations about the Fed’s rate cut, which will make Asian stocks more attractive, may counter negative sentiment on Chinese equities, which analysts say may face higher volatility after a rapid gain fuelled by margin trading and a rotation out of fixed-income products. Rumours have also been swirling that financial regulators may step in to keep a lid on the fervour to avoid a repeat of a quick boom-to-bust cycle in 2015.

“Beijing has no desire to let the market run into mania, nor to let it collapse under its own weight,” said Innes. “Whether this proves to be just a healthy pause or the first sign of a broader unwind will depend less on rumours and more on the hard economic data ahead.”

Foreign investors bought a total of US$900 million worth of Chinese onshore stocks in August, moderating from a purchase of US$2.7 billion in the previous month, according to Morgan Stanley. Global passively managed funds saw inflows of US$1.4 billion, while active funds recorded US$500 million of net selling, it said.